The “vaporized” and “case gone cold” news reports all convey a common underlying message: no one is responsible for what is now estimated as the loss of $1.6 billion taken from customer segregated accounts. There was no criminal activity. The message seems to instruct people to “mind their own business, keep quiet and just ignore what is the 8th largest bankruptcy in US history, a scandal tainted with fraud allegations that involves a man who is arguably the most politically connected Wall Street insider to ever walk among the backroom corridors of Washington DC.” Yet, by not officially using the “f” word (fraud), regulators, trustees, prosecutors and the rest of the panoply of public “protectors” make it more likely that the recipients, such as JP Morgan, of hundreds of millions in transfers of customer money in MF Global’s final days will simply get to keep it. The core integrity of the commodity markets has been destroyed and an “industry of investor protections” with an exemplary regulatory record for protecting customer funds, now demands a rewrite.

….

The “vaporized propaganda campaign” is a well-coordinated effort intended to confuse, divert and distract from the truth surrounding the crime of taking over a billion of customer funds. That’s the goal. In fact, it’s impressive how “Mr. Vaporized” has managed to keep this case out of the news so well.

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Rules of propaganda teach us that if you repeat something long enough, no matter how absurd, it will eventually be believed. Multiple sources and narratives have parroted the thematic evolution: there was an unknown amount of missing money, which became money that had somehow disappeared, and finally an investigation gone cold, setting the stage for customers to expect less than 100% of their money back.

….

Speaking on Bloomberg Law, a web-based video program, editor at large Bill Rochelle was clear: “Here is (why fraud) is an important point in the bankruptcy process,” Rochelle continued. “Congress passed what is known as a ‘safe harbor.’ What it says is the in a bankruptcy if money was paid in a stock transaction or if it was paid as margin, (MF Global account holders) can’t get it back. The only way you can get money back in a case like that if (the money) disappeared as a result of actual fraud.

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Unfortunately for MF Global customers, sweeping changes in the Federal Bankruptcy Code enacted in 2005 grant special super-priority status to derivatives in bankruptcy (including loans structured as repos) and prevent last minute margin transfers from being clawed back, except in the case of fraud (which everyone in charge refuses to discuss). The excuse, or in legalese, “safe harbor”, was again roundly questioned by many leading industry professionals, including R. Christopher Whalen, when he appeared on CNBC with Rick Santelli and in an article he penned at Zero Hedge titled “MF Global: Where’s the Cash — Part II.”

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To quote the classic movie Wizard of Oz: “Ignore the man behind the Curtin.” Ignore MF Global everyone. There isn’t a story here…

Groovygirl says:

Why would they spend so much time, energy, and money coordinating this huge cover up? After all, it is only $1.6 billion. The Fed can print that amount in less than 1 second. Or loan that amount to the CME that is supposed to be covering the loss of fraud. What’s the real reason for the push-down?

IT WILL HAPPEN AGAIN. (The 2005 bankruptcy law revisions have a huge loop-hole, giving a large incentive to take down a brokerage house and move customer funds in the last days. And now, they have completed the dry run with MF Global.)

It is the cover-up that is always worse than the crime. If the Government and Commodity regulators, just said, hey, my bag, we dropped the ball, and throw in some more regulations to build good will, and then have government pay out the missing $1.6 billion; there would be no story to cover up. And commodity investors would not be fleeing to other countries to do business. They didn’t pay out because that would set a precedent to pay out the next time this happens.

And if you do not understand what happened at MF Global and how to protect your investments, it will happen to you or your commodity investment or your hedge fund or your pension fund.

In case you missed Mr. Martenson’s recent post about the economic state of Japan, here it is. Good read. There are so many options for the next black swan event: European Debt 2.0, Britain, Middle East War/Oil Embargo, Japan, US Muni-bonds, flood, locusts, groovygirl can hardly keep track.